Robert Kiyosaki Gives Readers a Second Chance

admin February 5, 2015 Investing

Over the years, I haven’t been too kind to the best-selling author, Robert Kiyosaki. He’s certainly built a successful empire, and a large community people respect him for his business acumen, his willingness to try or to appear to try to help others, and his advice. However, I’ve always found his advice thin at best and dangerous at worst. I received his latest book, Second Chance: For Your Money, Your Life, and Our World, and before opening the book to the first page, I decided to give Kiyosaki his own second chance — and read the book with an open mind. His publisher probably didn’t read my previous commentary before offering to send me a copy for review.

I read the entire book on a flight from Phoenix to Philadelphia, and my second chance paid off — I thought this book was an improvement over Kiyosaki’s earlier works(I’ve only read a few), yet not without its frustrations.

Kiyosaki uses several devices in his latest book to tell his story. The first is an all-out admiration of Buckminster Fuller, starting with the book’s dedication and infiltrating every chapter. This makes some sense, as Kiyosaki has always used some of Fuller’s literary techniques, which I’ll get into a little further down this page. Fuller was a futurist, and more than any of Kiyosaki’s other books, Second Chance also takes a look at the future and the decisions one can make therein as a way of dealing with the economic struggles of today’s post-recession world.

It was Kiyosaki’s so-called “poor dad” who first admired Fuller, and this early glorification set the wheels in motion for an approach to life that would favor the lessons of the author’s “rich dad.” (I’m ignoring the debate about whether “poor dad” and “rich dad” exist or are part of an allegory. The use in the book of Fuller as a driver instead of “rich dad” eliminates the need for debate, so readers and critics can focus on the words.)

Fuller, or “Bucky,” appears throughout the book as an inspiration to Kiyosaki through words of advice in Fuller’s own published words and in private conversations with the author. This explains much of who Kiyosaki is today. Fuller made up words or changed their meanings to encourage people to see the world differently, or as he saw the world, and Kiyosaki takes the same approach. It works. People who aren’t accountants or have a financial education — most people — would first read Kiyosaki’s books without a solid understanding of the terms “asset” and “liability” in a financial context.

Kiyosaki, years ago, saw the opportunity to make those words mean something else. And those who accepted Kiyosaki’s version of an “asset” became life members of a secret club. They “get it.” And if you disagree, you don’t “get it,” and you’ll never succeed in the way Kiyosaki wants you to succeed. For Kiyosaki and his followers, a house is a liability, not an asset. And if you don’t want to accept this version of reality, the author’s books, lessons, and seminars won’t do you any good because you don’t believe.

These redefinitions and others appear throughout Second Chance, but it seems to be Fuller’s pamphlet Grunch of Giants that had the most profound effect on Kiyosaki’s life. The bankers control the world, the government is out to get us, and the military-industrial complex something something. Grunch of Giants is an interesting read, but it’s just a little paranoid.

The second trope is familiar to Kiyosaki readers: the angst for traditional education and the glory for real-estate seminars. This appears so frequently throughout the book that it’s impossible to ignore. Kiyosaki’s companies produce real-estate seminars, so it’s no surprise he’s writing about the idea of getting a real education through this method as often as possible. I don’t recall him specifically selling his own seminars throughout the book, but it certainly plants a strong idea in the readers’ mind. If a reader comes away from the book thinking college is useless and the money for college is better spent attending a real-estate seminar each month, the first place that reader would go is to Kiyosaki’s own educational products.

Again, just like invented language, this concept exists as a filter. If you don’t feel the same way as Kiyosaki about traditional education, you’re not going to read his books and attend his seminars. If you did, you’d probably think they were wastes of time. He doesn’t want you. He wants people who are frustrated or unable to succeed in a college setting. They will make good customers. People without a college education are more likely to fall prey to people taking advantage of them.

The third recurring theme of the book is an idolization of wealth. Readers who buy this book are more likely to have goals to be wealthy than to have goals that go a little deeper — for instance, to use wealth to do good things for others. It’s not the simple get-rich-quick crowd of the 1980s, but it’s a more complex, grown-up version of that audience. The way the author uses the idolization is through frequent “question-and-answer” sessions, where it is implied that the reader is asking simple questions which Kiyosaki “answers.” The questioner in these exchanges is characterized as envious, curious, and a little slow; the answerer is characterized as rich, sophisticated, and absolute.

The book describes an exchange between Kiyosaki and a few construction workers. Kiyosaki drives up in a Ferrari, and the workers are envious, thinking they could never afford such a fancy car. Kiyosaki, in this story, proceeds to tell them they can, and that it’s just a matter of owning properties that put off positive cash flow, and that can be done without the education that the construction workers obviously do not possess. And here in this story, we see Kiyosaki positioning himself as the wealthy but down-to-earth, friendly guy who’s happy to teach unfortunate souls about something they will probably never be able to do. It’s the whole premise of the book — and Kiyosaki’s career. The readers are the construction workers, and Kiyosaki’s got the Ferrari the readers want. Please tell us your secret!

In Second Chance, Kiyosaki goes on record again with a prediction: There will be a market crash by 2016, which is the same prognostication he offered in an earlier book. The author believes that the recession of 2008-09 was partial fulfillment of that earlier prophecy. Oh, but he later demurs, and says that if the 2016 crash doesn’t happen, it would be due to artificial propping-up by the powers that be; thus, Kiyosaki stands to consider himself correct whether a crash (to which the latest recession when compared would just be a minor event) occurs by 2016 or not.

The book contains a number of misleading charts. In some cases, the data being represented in these chats doesn’t really prove the point that they author is trying to make, and in other cases, the data is represented in such a way that it is misleading. There is one such chart that supposedly shows that unemployment is rising for workers with at least some college education. The chart makes it appear that unemployment is decreasing for workers with just a high school education or less, and that’s simple a misleading graphical representation of data. Kiyosaki is careful in the text not to make an inaccurate claim about what the data show, but the visual representation allows readers to walk away with the wrong idea.

What Kioysaki might be getting right.

These annoying tropes aside, and the fact that the book contains no index and makes writing this article very difficult, there are many interesting ideas within the book that are worth discussing. Here’s what I liked reading about.

Three types of wealth. Kiyosaki borrowed the concept from another author, but discusses it in detail. “Primary wealth is resource wealth.” If you own oil — actual oil, not oil funds or ETFs or shares in companies that are involved in the oil industry — you have a protection that those with only tertiary wealth do not have. It’s not just oil — it’s fertile land, trees, and other natural resources, and Kiyosaki includes gold and silver in this category.

“Secondary wealth is production wealth.” Those who work directly (and own businesses that) produce food or other products, dealing with the resources owned by those with primary wealth, you have secondary wealth.

“Tertiary wealth is paper wealth.” This identifies the majority of Consumerism Commentary readers and myself. Savers, those with money in the bank or invested in stock market, fall into this category. This is the “affluent investor class,” and those who will be hurt hardest by the next (or any) market crash.

It’s true that shareholders and savers have the most to lose, but that doesn’t mean that those with secondary or primary wealth are fully protected. Businesses can fail, resources can dry up, and there’s always going to be an entity that more powerful than you — and I don’t mean God. Companies getting rich with oil in North Dakota are now finding that their lives can be upended in a matter of weeks when OPEC decides the price of oil needs to be lower.

The Cashflow Quadrant. From Kiyosaki’s other books, the “Cashflow Quadrant” makes an appearance here. The quadrants describe the type of work one might do and how the income from that work can be classified. I’ve been in all four quadrants: employee, self-employed, business owner, and investor. The quadrants are determined by tax law. If you’re self-employed, you pay the highest taxes — but what’s different between being self-employed and being a business owner? Well, even when self-employed, your working to get paid; a business owner is looking more at the value of an asset — the business — she is creating.

Basic principles in psychology. The author addresses a number of aspects of psychology that should be familiar to any student who has taken an introductory-level course: Maslow’s Hierarchy of Needs and a variety of intelligences.

I’ve written at length about Maslow’s Hierarchy of Needs here at Consumerism Commentary.

The latter looks beyond classical measures of intelligence like IQ, and beyond the two types that he feels receive the most attention in traditional education, verbal-lingustic and logical-mathematical. Skilled dancers and athletes have strong body-kinesthetic intelligence; artists have strong visual-spatial intelligence; musicians have musical intelligence; strong communicators and socializers rate highly for interpersonal intelligence; and self-motivators have strong intrapersonal intelligence. Kiyosaki adds a spiritual intelligence to this list.

Generalists and specialists. Kiyosaki points out that specialists are not suited to being entrepreneurs. They may be fantastic at one particular skill, but operating a company requires a lot of knowledge of many different aspects of a business or industry.

I lean on the side of agreeing with Kiyosaki here. Career advice tends to sit on the opposite side, often explaining that being as good as possible in one specific area is enough to get a great job and build a good career. The versatility that comes with being a generalist has allowed people who are more adaptable to survive better through the recession, and these generalists have the capacity to to succeed in any situation.

Overall, em>Second Chance: For Your Money, Your Life, and Our World points out the value in owning real-estate property and resources, but like all books, doesn’t offer too many hard details and doesn’t address risk. To go deep, the author assumes that the reader will attend seminars, and the prediction of a 2016 crash creates some urgency for the reader.

Honestly, when I closed the book after reading it cover-to-cover on a flight from the West Coast to the East Coast, I did feel motivated. I’m in a position now where working doesn’t add much to my net worth, and I need to start focusing more on cash flow. I am aware of this and I’m actively looking into ways to make that work, from buying web-based businesses that all ready produce an income (Kiyosaki does promote this idea in the book) to multi-family or corporate real estate.

The work I do today is mainly for cash flow, but it’s been more of a trickle than a gush. I have no interest in earning Ferraris or living some kind of lifestyle Kiyosaki believes motivates his readers, and I’m technically free to do whatever I like with my life from a wealth perspective. I’d much rather live off cash flow than assets, and the book has encouraged me to think about this more.

For more on Robert Kiyosaki, see Rich Dad Academy and Is Your Home an Asset or Liability?

Robert Kiyosaki Gives Readers a Second Chance is a post from Consumerism Commentary. New to Consumerism Commentary? Start here.